No deal Brexit would be catastrophic blow to British auto industry

Three quarters of UK automotive businesses fear a ‘no-deal’ Brexit will threaten their future viability, according to a new member survey announced by the Society of Motor Manufacturers and Traders (SMMT) at its 102nd annual dinner in London this evening. The results highlight the critical need for a Brexit withdrawal deal and transition to prevent the industry falling off the cliff-edge on March 29 when the UK leaves its largest and closest trading partner, the EU.

74.1% of companies with UK operations responding to the survey said that a ‘no-deal’ scenario would damage their business, with fewer than 9.0% foreseeing any positive impact. More than half said their operations have already suffered as a result of uncertainty about future trading arrangements. Almost a third said they had postponed or cancelled UK investment decisions because of Brexit, with one in five having already lost business as a direct consequence.

More than half of firms said contingency plans are now being executed, with over one in 10 (12.4%) relocating UK operations overseas and the same proportion already reducing employee headcount. Many have also made alterations to logistics and shipping routes, investment in warehousing and stock and adjustments to production schedules.

SMMT members also outlined the further and long-term damage that a ‘no-deal’ Brexit would do to their businesses. Almost seven in 10 (68.5%) said their profitability would be negatively affected, with 53.9% concerned about their ability to secure new overseas business and a similar number worried about maintaining investment in their UK operations. A further half said a ‘no-deal’ scenario would undermine their ability to maintain their existing workforce.

Automotive is one of the UK’s most valuable assets, employing 856,000 people and delivering £20.2 billion to the economy. Since 2010, car production alone has risen by a third, with 1.67 million cars leaving production lines in 2017 – 80% bound for export, most to the EU. Over the same period, the number of jobs supported has risen by 120,000. This growth has been dependent on free and frictionless trade afforded by the single market and customs union. A no-deal Brexit would bring an immediate end to the seamless movement of goods, resulting in disruption at the border and delays, throwing Just-in-Time manufacturing into chaos and undermining the competitiveness of the sector – ultimately putting profitability and jobs at risk.

Mike Hawes, SMMT Chief Executive, said, “Frictionless trade as part of the EU single market and customs union has driven the success of the UK automotive industry so the fact we are leaving is already painful, and already causing damage. Leaving without a deal would be catastrophic – plants will close; jobs will be lost. Leaving is not what we wanted, but we recognise that the withdrawal agreement has been hard-fought and, crucially, delivers a transition period which steps us back from the cliff-edge. We need a deal now, and we need an ambitious deal for the future that guarantees frictionless trade with our most important market – nothing else will do, and we urge all parties to remember what’s at stake.”

Tony Walker CBE DL, SMMT President and Managing Director, Toyota Motor Europe – London Office, said, “No deal is not an option. In the short term, crashing out of the EU would have immediate and devastating impacts, with border chaos disrupting the Just in Time basis on which our business depends. Disruption could last for weeks – even months. It is unimaginable that we could implement full WTO import and export procedures overnight. For the longer term, a ‘no-deal’ Brexit would harm our competitiveness, undermine sales and cost jobs… We need the certainty of a deal, not more uncertainty, and we need the smooth transition period based on current trading conditions… It is vital we have free and frictionless trade with common technical standards. Without these, we risk losing all we have achieved in building a world-class automotive sector.”